Financial Due Diligence

Services

In today’s fast-moving investment environment, mergers, acquisitions, and strategic partnerships demand more than surface-level analysis. Financial due diligence is a critical step in assessing the true financial health, sustainability, and risk profile of a target entity before finalising a transaction.

CityLinkers offers comprehensive financial due diligence services designed to support investors, acquirers, and corporate decision-makers with reliable, data-driven insights. Our experienced team conducts objective, in-depth reviews of financial statements, working capital, revenue recognition, cost structures, debt obligations, and other key financial metrics to ensure full transparency.

We go beyond verification by identifying potential red flags, quantifying deal risks, and uncovering value-enhancing opportunities—enabling our clients to negotiate confidently and structure transactions with a clear understanding of both risks and rewards.

With CityLinkers, financial due diligence becomes a strategic advantage—paving the way for successful investments and sustainable growth.

Scope of Services

CityLinkers’ financial due diligence services cover all critical aspects necessary for comprehensive transaction evaluation:

Financial Statement Analysis

As part of our financial due diligence services, CityLinkers conducts a thorough analysis of the target company’s financial statements to uncover the true state of its financial health and performance. This includes an in-depth review of the balance sheet, income statement, and cash flow statement to ensure accuracy, consistency, and transparency. We assess the company’s profitability, liquidity, and overall financial stability, identifying any areas of concern that may impact the transaction. Our team also analyses historical trends and year-over-year variances to detect financial anomalies or irregularities that could indicate operational inefficiencies or hidden risks. This detailed financial insight enables clients to make informed investment decisions with confidence and clarity.

Review of Accounting Records

CityLinkers conducts a meticulous review of the target company’s accounting systems and financial records to assess the accuracy, transparency, and compliance of its reporting practices. Our team evaluates adherence to Hong Kong Financial Reporting Standards (HKFRS), with a particular focus on the appropriateness of revenue recognition policies, expense classification, and the valuation of assets and liabilities. We also identify any non-standard or inconsistent accounting treatments that may affect the reliability of the financial information or indicate underlying risks. This review provides crucial insights into the integrity of the company’s financial reporting and supports a more informed assessment of the transaction.

Review of Legal and Tax Matters

CityLinkers conducts a detailed review of the target company’s legal and tax position to identify potential compliance issues, financial exposures, and risks that may impact the transaction. Our evaluation includes an examination of corporate registration documents, shareholder agreements, and relevant regulatory filings to ensure the company’s legal structure is sound and properly documented. On the tax side, we assess the status of profits tax, salaries tax, and stamp duty filings, reviewing past submissions and current obligations for accuracy and completeness. We also investigate any indications of underpaid taxes, unresolved disputes with tax authorities, or other contingent liabilities that could affect the valuation or post-acquisition obligations. This comprehensive review provides clarity on legal and tax risks, enabling informed decision-making and better deal structuring.

Review of Key Agreements

As part of our due diligence process, CityLinkers conducts a thorough review of the target company’s key agreements to evaluate the financial implications of its contractual obligations. This includes analysing major supplier and customer contracts to assess revenue stability and dependency risks, as well as examining loan and financing agreements to identify repayment terms, covenants, and potential liabilities. We also review lease arrangements and investigate any off-balance sheet items that may not be fully reflected in the financial statements. Particular attention is given to the risks associated with long-term commitments that could impact cash flow, flexibility, or future operational performance. This review ensures a clear understanding of the company’s contractual landscape and any financial exposures it may carry.

Related Party Transactions

CityLinkers performs a detailed review of related-party transactions to assess their compliance, fairness, and potential impact on the financial integrity of the target company. We examine the nature and terms of these transactions to ensure they meet applicable transfer pricing regulations and reflect arm’s-length principles. Our team evaluates whether the pricing is reasonable, commercially justifiable, and supported by appropriate documentation. We also verify that all related-party dealings are properly disclosed in accordance with relevant financial reporting standards. This review helps identify any conflicts of interest, hidden liabilities, or governance concerns that may influence the transaction or raise regulatory red flags.

Site Visits and Asset Verification

As part of our due diligence process, CityLinkers conducts site visits where appropriate to verify the existence, condition, and utilisation of the target company’s physical assets. These on-site inspections allow us to confirm the accuracy of fixed asset registers, assess the state of equipment and property, and validate the consistency of operational data with financial reporting. We also review inventory levels, storage conditions, and valuation methodologies to ensure proper accounting treatment and identify any potential obsolescence or misstatement. This hands-on approach enhances the reliability of our financial analysis and provides deeper insight into the operational integrity of the business.

Working Capital Analysis

CityLinkers conducts a detailed analysis of the target company’s working capital to evaluate its short-term financial health, operational efficiency, and liquidity position. We examine key turnover ratios for accounts receivable, accounts payable, and inventory to assess how effectively the business manages its day-to-day operations. Our team also evaluates the reliability and adequacy of cash flow to determine whether the company can meet its short-term obligations without strain. In addition, we identify any seasonal patterns, structural inefficiencies, or funding gaps that may impact the stability or sustainability of the business. This analysis provides critical insight into the target’s ability to support ongoing operations and generate value post-transaction.

Assessment of Potential Liabilities

CityLinkers performs a comprehensive assessment to uncover financial risks that may not be fully captured in the target company’s financial statements. Our review focuses on identifying unrecorded liabilities or off-balance sheet obligations that could materially impact the transaction. We also evaluate the existence of contingent liabilities, such as pending legal claims, contractual warranties, or guarantees that may give rise to future costs. Additionally, we examine potential exposures related to environmental, regulatory, or compliance issues that could result in penalties, reputational harm, or operational disruption. This analysis ensures a thorough understanding of hidden risks and supports informed decision-making and appropriate deal structuring.

Why CityLinkers

Experienced Professionals

Our team is led by senior professionals with Big Four backgrounds and a proven track record in mergers and acquisitions across a wide range of industries and jurisdictions. With deep expertise in financial due diligence, transaction advisory, and cross-border deal structuring, we bring a high level of technical proficiency and strategic insight to every engagement. This experience enables us to anticipate complexities, identify hidden risks, and deliver value-driven guidance that supports successful transactions.

Objective and Independent Assessments

CityLinkers delivers objective, independent assessments grounded in thorough analysis and reliable data. Our due diligence process is designed to provide clients with clear, fact-based insights that support accurate pricing decisions and proactive risk management. By separating assumptions from evidence, we help stakeholders gain a realistic understanding of the target’s financial position, uncover potential red flags, and make informed decisions with confidence and clarity.

Regional Expertise

CityLinkers brings deep regional expertise across Hong Kong, Mainland China, and the broader Asia-Pacific markets, enabling us to support both local and cross-border transactions with precision and efficiency. Our team understands the regulatory environments, business practices, and market dynamics unique to each jurisdiction, allowing us to navigate complex transactions seamlessly. Whether dealing with inbound investments, regional expansions, or multinational acquisitions, we provide the local insight and cross-border coordination needed to drive successful outcomes.

Actionable Reporting

At CityLinkers, we prioritise clarity and relevance in our reporting. Our due diligence reports are concise yet comprehensive, delivering the key insights that matter most to executive decision-makers and investment committees. We focus on highlighting material findings, quantifying potential risks, and presenting clear, actionable recommendations. Each report is tailored to the transaction context, ensuring that stakeholders have the information they need to make timely, well-informed decisions with confidence.

Supporting Informed Investment with Confidence

At CityLinkers, we are dedicated to providing clients with clear, accurate, and reliable financial insights throughout every stage of the M&A process. Our financial due diligence services are structured to enhance transparency, identify and mitigate risks, and support sound, data-driven decision-making. By uncovering critical financial details and potential deal-breakers early on, we help investors and acquirers move forward with greater clarity and confidence—paving the way for successful transactions and long-term value creation.

If you would like to learn more about how CityLinkers can support your acquisition or investment project, please contact us. We are ready to assist you with expertise, precision, and a commitment to your success.